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Out of the Shadows

How Bank-Owned Property Affects the Real Estate Market

My parents sold the house I grew up in eight years ago. Now I had always driven by on my occasional visits back home, but never upped the creep factor to the knocking-on-the-door level. I didn’t really care who lived there; just knowing that someone did brought me some small, inexplicable sense of comfort.

However, the last time I made the pilgrimage back, I discovered that the place of my humble beginnings had become The House. You know the one, because there’s one in every neighborhood. Slightly too kempt to be abandoned, a little too haggard for residence. Source of hush-hush gossip, neighborhood headshakes and squatters' raised eyebrows. Forgotten, but not gone. A denizen of real estate purgatory.

Whomever had purchased the house from my parents had done so at a very inopportune time, just before the last big market crash. They presumably later defaulted, and the house was taken back by the bank. And there it still sits, a vessel without a captain, adrift and at the utter mercy of the beating sunshine, merciless winters and daring aluminum siding bandits.

My first instinct was to buy it. This made no sense, admittedly. I live 2500 miles away, and had zero intention of moving back. But I felt that in some karmic kind of way, buying it would somehow provide an impenetrable force field of protection, bubble-wrapping my childhood forevermore. Like I said, it didn’t make much sense. I was fueled by a desperate form of nostalgia, not logic. But this all became immediately moot. You see, The House was not for sale.

This is how I became familiar with the concept of “shadow inventory.” Shadow inventory refers to bank-owned properties that are not currently on the market. The term became popular in the wake of the financial crisis, when the loans that were being pushed through for mortgages that people simply could not afford were defaulted on.

According to Bloomberg, the resulting spate of foreclosures left the banks holding up to 4 million homes at its peak. This sudden influx of $382 billion of inventory left banks facing new challenges. AOL reported that as many as 90% of the REOs (Real Estate Owned) properties were being kept off the market. They became The House, four million times over. But why?

There are 3 good reasons that shadow inventory happens:

1. Foreclosures. Though foreclosure numbers have subsided in recent years, a contributing factor to empty homes is simply time. According to Realtytrac, the average foreclosure period in Q2 of 2016 was 629 days. In New Jersey, which leads the nation in lengthy foreclosures, the average turnaround was 1,249 days, or just over three years.

2. Market Tolerance. Banks must assess the current market conditions. At the height of the financial crisis, putting the foreclosed houses immediately up for sale would have flooded an already stagnant, bottomed-out market. In fact, AOL estimated that overall home values would have dropped by 20%. Banks must always act prudently on behalf of the market.

3. Appreciation. Market tolerance also has its upside. Many of the homes shadowed by the crisis taught a valuable lesson. By taking on the role of de facto caregivers, banks took these fragile properties in, nursed them back to health, and then, when the time was just right, released them back into the wild for a nice profit. Also, in some of the hotter current markets, the smart money is on purposely keeping properties off the market to let them gain value.

So the next time you are out for a walk in your neighborhood and come upon The House, and start to speculate and theorize (or impulse buy), rest assured that no house is truly abandoned. And someone behind the scenes may just be looking out for your neighborhood’s best interests.

November 29, 2017

MIMICS Software

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Extortionary Circumstances

“Josh, you have a phone call,” my manager reported.

My heart immediately sank. I had been receiving threatening phone calls for over a week, both at home and at work, and I knew this was another one. The person on the other end wanted money. Or else. He specified a dollar amount, a drop location and a time, and then threatened to kill me if it wasn’t there. He was my best friend.

Pause. Let’s back it up just a bit. Add context. This was circa 1992. I was a high school junior, washing dishes at Ponderosa Steak House a few nights a week to pay off my trusty K Car. I didn’t exactly have much game, let alone any money. But I also didn’t have any enemies that I knew of. That’s why somehow I knew it was my old friend “Jake.”

Jake and I had been best friends a couple years before, spending a couple of inseparable summers together, forming a 2-piece skateboard “gang,” writing really dope gangster raps, and being generally harmless little punks.

Then his parents got divorced around the time we started high school. Like an after-school special, he promptly ditched school in favor of cruising Main Street and smoking weed with his mustachioed older cousin. Needless to say, the skateboard gang disbanded, and Jake and I walked our separate paths.

So a couple years later when those calls came, that car parked across the street, the doorbell rang late at night, I somehow knew it was the two of them. Motive? I was an easy target. I was terrified, and fear is a great motivator. I was sure to pay.

Yes, I am using this story to parallel a ransomware attack. Work with me. There are some obvious physical differences: In this case, I knew my attackers, I had police resources, and, finally, nothing physical had been taken from me. They were not demanding money for me to get my files back, but rather to NOT KILL ME. Different, possibly worse, but nothing tangible had been stripped from me that I had to pay to recover.

However, the emotional similarities are undeniable. Namely, that awful feeling that you no longer control your own destiny. Someone else has life-hacked you and is now pulling the strings. For months after, the sound of the phone ringing caused my fists to clench. Co-workers walked me out to my car after closing. These things make you feel small, vulnerable and exposed. And they are all exacerbated by the feeling of having no good options, and nowhere to really turn for help. And even if you pay them, you have no guarantees that they will leave you alone or even return your files. It is a helpless feeling.

But there is one glaring difference that I would like to draw your attention to. And that is that my situation could not have been prevented. Like any victim, at some point you ask yourself what could I have done differently? You second-guess yourself, and wonder what if I had done this or that. But in my case, there is nothing I could have done differently; no forethought or amount of planning could have stopped it.

With ransomware, however, there are measures you can take to protect yourself. FOLLOW THIS GUIDE for starters. Do not bury your head in the sand and pretend it can’t happen to you. Better to prepare the castle for a siege, because you’d better believe those bad guys are out there somewhere, looking for a way in. With some good disaster planning and a little luck, hopefully you’ll never meet them.

Oh, the Jake fiasco? It ended in small-town theatrics. The police set up a sting, it was summarily bumbled, and the bad guys got away. But it had the desired effect; fear is a great motivator. They never bothered me again.

CX Marks the Spot

“Best camp of the summer!” my son exclaimed, at the conclusion of art camp last week.

“Great! You’re never going there again!” I replied.

Okay, I didn’t say that. But I thought it, and that sentiment is 100% sincere. I don’t care how much fun he had, I knew thirty seconds after entering the place that this would be his first and last week there. Let me explain.

We walked in, looking appropriately bushy-eyed and curious as day oners tend to. Where did we check in? Was there paperwork to sign? I noticed a woman sitting at a small table, no more than twenty feet away. By process of elimination, I determined her to be the one. But instead of approaching us, greeting us, or generally acknowledging our existence in any way whatsoever, she just sat there, quietly avoiding eye contact until we finally wandered over to her.

Are you serious right now? I don’t care about your diptych leanings or your cubist tendencies. I’ll forgive the rotating staff and general disorganization. I mean, all you have to do is take an interest in my child. Say hi. Maybe ask him his name. Go nuts. And in this respect, you are failing legendarily, ma’am.

That was my perception, anyway. And not to sound too self-important here, but my perception is about the ONLY thing that matters in this scenario. Because it is my (the customer) perception that is the most fundamental aspect of the overall Customer Experience (CX).

I gave this example to demonstrate the stark differences between the UX (User Experience) and the CX. The UX was fantastic. My son did observational drawings, made fossils and brought home a tiny ice floe diorama complete with polar bears. The user experience was supercharged with creativity and radiated awesomeness.

The problem for this particular business is that the UX is merely one slice of the overarching CX pizza pie. CX is the sum of all the customer interactions, including customer service, marketing, brand touchpoints and more. And, as aforementioned, it is how the customer perceives he/she is being treated. And my perception was that of a bag of garbage you speed by on the highway.

My wife loves to talk about the importance of being “properly greeted” when we go into any small business or restaurant. I am not high maintenance, I swear. I don’t need hand-holding or extra attention; but I would like to be simply acknowledged as a patron of your establishment. I would, it seems, like to be properly greeted.

So the question becomes, how can we, as businesses, control how we are perceived by our customers? Perception is a highly subjective thing, and it can be easily influenced by myriad external factors, such as technological competency, intuition and just plain mood.

The answer is that we can’t. Not entirely. But what we can do is adjust our dial a bit, to make sure we are clearly tuned to the frequency of our customers’ signals. Here are 4 easy ways to boost your CX:

1. Take know for an answer. Have you visited your operating principles recently? Are they being followed, or are some updates needed? How prominent a role does the customer have? Take a moment for some self-reflection. Is the company moving in the direction you want, philosophically, or just kind of getting by?

2. Say what you do, do what you say. Trite but true, perhaps, but setting expectations for your customers and then delivering them appropriately is crucial. There is a direct correlation between the expectations and the delivery to the overall level of customer satisfaction. Remember, it is all about perception; so if you are promising A, B and C, make sure you are delivering all three consistently and continuously.

3. Check-in are not just for hotels. If you want to know how your customers perceive you, ASK them. It’s just crazy enough to work. People like to be thought of. Especially in an age of online shopping, automated payments and autobots, the human touch holds arguably more sway than ever.

4. Think (customer) first. You don’t need to go full undercover boss, but the act of consciously thinking about how your actions could be received can be helpful. It’s easy to lose sight of the customer from time to time. So be pro-active. You’ll never know exactly how they feel, but deciding with empathy will put you on the right track.